Last Updated on February 22, 2024
The crypto industry is developing at a rapid pace, with many companies tapping into this sector. Institutions enter the market in different ways. Some may buy and hold assets long-term, others integrate digital payments, trade, provide liquidity, etc. Prominent investors in crypto require institutional services, particularly in terms of custody. In this article, we will discuss how institutions become the key actors in terms of custody.
The Role of Crypto Custody
Institutional crypto custody refers to the secure storage and management of digital assets on behalf of large financial entities like investment firms, hedge funds, banks, and other institutional players. This service is crucial for institutions that strove to invest in crypto while ensuring the safety and integrity of their holdings.
Here are the key aspects of institutional custody:
- Secure storage. Custodians employ advanced security measures, including cold storage, multi-signature authentication, and encryption, to protect digital assets from unauthorized access and cyber threats.
- Risk management. Custodians implement comprehensive risk management practices to reduce possible threats, ensuring the safekeeping of institutional funds.
- Compliance. Institutional crypto custodians adhere to regulatory standards and compliance requirements, including anti-money laundering and know-your-customer regulations.
- Insurance coverage. Some institutional custodians provide insurance coverage to protect against potential losses due to hacking or other unforeseen cases.
- Accessibility. Custody services offer convenient access to digital assets, allowing institutions to manage and trade their holdings efficiently. This may involve user-friendly interfaces for portfolio monitoring and transaction execution.
- Auditability. Custodians facilitate regular audits and provide transparent reporting to institutions, ensuring accountability and compliance with industry standards.
How Institutional Crypto Investors Provide Custodian Services
One of the examples of custody solutions by institutions is a well-known German bank, Deutsche Bank, which announced a partnership with the Swiss crypto company Taurus. They plan to offer custody services for digital assets and tokenization for their institutional clients. Over the past three years, this bank has been working to offer crypto services to its clients. It applied for a crypto custody license in June 2023.
On September 14, the American BTC exchange Swan revealed a partnership with the global digital assets custodian BitGo to introduce a new service for BTC custody. Unlike Deutsche Bank’s offering, this service will focus exclusively on institutions buying Bitcoin. The product is awaiting regulatory approval and is expected to be in work in 2024.
Final Word
Institutional investment in crypto requires reliable custody services to store and trade assets safely and efficiently. Today, prominent companies such as Deutsche Bank are launching their custody services for crypto-oriented clients, which will comply with regulations and have robust security measures. This trend reflects the growing importance of secure custody solutions in facilitating institutional investment in the crypto space.